Refinancing Your Property: Beware of Mechanic's Lien

Written By Kevin McKernan

Mechanic's liens are filed related to construction disputes, and a mechanic's lien clouds the title of the property. If a client is looking to refinance and a couple of mechanic liens have been filed, there are a couple of different options available: 

  • One option is to pay the lienor to satisfy the lien, which property owners do not want to do since they are in a dispute with the lienor.

  • Sometimes clients tell me they're going to deposit money with the title company. 

That's never a good idea. There is no legal justification for depositing money with title companies in most states, meaning that if a demand is made on the title company, they have to turn the funds over. 

Another option is obtaining what's called a discharge mechanic's lien bond or a release of lien bond. A discharge mechanic's lien bond guarantees that the surety will pay the lienor in the event a judgment is filed in the action and the lien is foreclosed on. All the necessary legal avenues or all the necessary items to collect on a bond are done. 

Bonds are filed prior to litigation starting. So, once litigation starts, the surety is well aware of the ramifications and is not going to pay out unless there's a final court order prepared with a deposit with a title company, where there could be a premature payout.

This document is designed for general information only. The information presented in this document should not be construed to be formal legal or tax advice nor the formation of a lawyer/client relationship. 

For more information on this and other topics, please contact Kevin via any of the channels listed below:

📧 kevin@kmckernan.com  | 📞 718-317-5007

Kevin McKernan
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